For both United and American, basic economy fares are still
in the testing stage, but so far neither airline is pricing the product
aggressively. Searches on United.com last week for basic economy tickets showed
that the carrier is typically selling the new service for approximately $20
less one way than standard economy seating.
Searches on AA.com yielded similar results. For some
customers, that might represent enough of a price break to be worth boarding
last, sitting in the back of the plane, not being able to get a seat assignment
until check-in and giving up the option to change or cancel a flight. But for
flyers who typically travel with one carry-on suitcase, $20 off the base fare
won't even make up for the $25 they'll have to pay to check that bag since both
United and American limit basic economy ticket holders to a single carry-on
small enough to fit underneath a seat.
In fact, said travel industry analyst Henry Harteveldt of
Atmosphere Research, United and American might be sending a message with the
way they've priced basic economy. "This is a product they don't really
want you to buy," Harteveldt said.
United spokesman Jonathan Guerin offered a different
explanation, however. "We'd like to sell that fare to the customers who
choose to purchase it," he said. "If you're good with just a backpack
and a laptop, why not save $20?" He added that once in their seats, basic economy
passengers get the same onboard service as those sitting further forward in the
main cabin.
Lending credence to Harteveldt's theory, however, is the way
United and American are displaying basic economy itineraries. Shoppers who
click on such a fare after an initial flight search encounter a pop-up screen
that lays out the differences between the basic economy and economy products
and then gives them the option of sticking with the cheaper service or
upgrading.
Harteveldt said the airlines are using the lower base fares
of basic economy as a way to show up higher in priced-based flight search
results on OTAs and travel search sites. "They use the basic as the
attention-grabbing price, if you will, and then they offer inexpensive
trade-ups to get a much better experience," he said.
Basic economy products are largely seen as the legacy
carriers' approach to competing for price-conscious flyers with discount
airlines like Spirit and Frontier. In 2012, Delta became the first of the Big
Three to implement the fare class. American and United are only now following
suit.
American introduced its basic economy product in 10 markets,
eight of which have direct competition from ultralow-cost carriers (ULCCs). On
the other two routes, from Miami to Tampa and Miami to New Orleans, American
competes with low-cost and ULCCs that fly from nearby Fort Lauderdale to Tampa
and New Orleans. Searches last week for tickets on American basic economy
routes suggested that the carrier often still isn't matching the prices of
discount competitors.
For example, American's May 2 fare of $101 one way from
Philadelphia to Fort Lauderdale bested Frontier by $2 but lost out to JetBlue's
$69 fare and Spirit's $44 fare.
American's basic economy fare from Charlotte to Orlando on
May 3 was $131, compared with Frontier's fare of $46.
United launched its basic economy service from its seven
hubs to Minneapolis, where, according to airline president Scott Kirby, the
carrier has an operations team that has proven successful at implementing new
initiatives. Three of those routes -- from Minneapolis to Newark, Washington
Dulles and San Francisco -- lack ULCC competition. In those cases, United is
competing on price with its legacy rivals.
For example, United and Delta both offered one-way, basic
economy fares on May 2 from San Francisco to Minneapolis for $173. (Under the
airlines' varying basic economy rules, Delta flyers could travel with a free
carry-on-size suitcase, but United customers would have to check such a bag for
$25.)
For a one-way ticket from Minneapolis to Houston, United and
Delta on May 2 again were charging the same price, $204, for basic economy on
the several flights they offer during the day. But they were making no effort
to compete on a price basis with Spirit's lone daily service between the
markets, which departs at 9:05 p.m. and was on sale for $44.
On the other hand, in the highly competitive
Minneapolis-Denver market, United's one-way basic economy fare on May 2 was
just $5 more than the $63 fares offered by Frontier and Spirit. Delta also
flies that route and was offering the same $68 price as United. Southwest was
charging $69, but unlike its U.S. competitors, Southwest doesn't charge for
carry-on or checked bags, or change fees.